It's that time of the year again to wonder where the heck 2010 went, and reflect upon the highs and lows of the year. As a camera reviewer, I had some fun cameras to play with this year, and these are my favorite compact cameras of the year.

Favorite Compact Cameras of 2010

The contenders for the favorite compact camera of 2010 are the Canon PowerShot S95 and the Panasonic Lumix LX-5. These two cameras are each manufacturer's compact flagship powerhouse and represent the best in image quality that you can get in a compact camera today.

Neither are perfect though. For sheer image goodness the Canon S95 has the edge over the Panasonic LX-5. But while its cool black exterior imparts a certain Zen minimalism to it, the S95 handles worse.

There's nothing to grip on its flat surface, the Mode dial is stubbornly stiff and the zoom toggle is a tiny stub. The control ring - a ring around the lens which gives you control over manual settings like aperture and shutter speed - raises its usability by several points, but falls short of redeeming the minuses. You can however, improve the S95 with an additional custom grip.

The LX-5 on the other hand, has beautiful handling, with a great grip and a really intelligent iA (intelligent Auto) mode which takes care of every setting for you, leaving you free to just point and shoot. I found it had this amazing ability when shooting JPEGs to retain details in normally under or overexposed areas, and I loved the control wheel on the back which lets you change settings much like a DSLR camera.

Where it falls short is that lens cover, which you have to take off every time to take a shot. I know it should feel okay, after all I do the same with my DSLR camera's lens cover, but somehow it just doesn't feel right with a compact. Like the S95, you can make your out-of-the-box LX-5 better with a custom lens cover, which covers the lens and opens out when the camera turns on and the lens pushes it out (like this).

In the end, both cameras deliver above average image quality, with the added bonus of being to shoot in RAW for the quality purists. But both also feature above average prices, the Canon S95 goes for $669 while the Panasonic LX-5 sells for $799. These are the official retail prices, you'll probably be able to find them for cheaper in the stores.

If I had to choose, I'd suggest the Canon S95 for photographers who place image quality first and foremost, while recognizing its tougher handling. For people who value ease-of-use over image quality, it's the Panasonic LX-5 for sure. Neither camera is perfect, but then again nothing is, and I'd wager that owners of either camera will be plenty satisfied with them.

The Real Favorite Compact Camera of 2010

Here's the kicker though: Neither of these cameras are my favorite compact camera of 2010. My favorite compact camera of the year is the iPhone 4.

I'll admit it; sometimes I'm just too lazy to take a compact camera out with me. And sometimes photographic moments happen just when I don't have a camera around. Like photographer Chase Jarvis wrote the book and app on; 'the best camera is the one that's with you.'

Being my phone, my iPhone was always with me. And the iPhone 4's image quality is surprisingly good for a mobile phone camera. Sure, it's not S95 or LX-5 good, but it's good enough for those everyday moments.

The HDR feature - an update that came completely out of left field - has been a gift. I was nonchalant about the feature when it came out, but it's been a lifesaver, bringing back washed out details I would otherwise have missed; the dark areas of an architectural detail, my girlfriend's face in the sun, my dad standing in front of a bright window.

And the best thing about the iPhone 4 is how easy it is to share photographs with friends and family. Take a photo, edit it with one of the many photo apps on the iTunes store, and send it out to Twitter or Facebook - all within minutes, on the move and nowhere near a PC. Or simply share photos by showing them on the phone's large screen, larger than any compact camera's LCD.

You can argue that the iPhone 4 isn't strictly a compact camera, but mobile phone cameras like these are taking over many of the shots that used to be taken with compact cameras. And the ability to share photos immediately has become such an essential part of our photo-shooting lives, thanks to 3G and social media sites, that compact cameras without internet connections are looking increasingly archaic. It's the great challenge that compact cameras will have to face in 2011, or face greater threats from web-connected phones as their cameras improve.

So there you have it, dear readers. Favorite compact camera runner-ups of the year; the Canon S95 and the Panasonic LX-5. Favorite compact camera of the year - surprisingly - the iPhone 4.